Granite Point Mortgage Trust Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 9 speakers on the call.

Operator

Morning. My name is Kevin, and I'll be your conference facilitator. At this time, I'd like to welcome everyone to Granite Point Mortgage Trust First Quarter 2023 Financial Results Conference Call. All participants will be in a listen only mode. After the speakers' remarks, there will be a question and answer period.

Operator

Please note today's call is being recorded. I'll now turn the call over to Chris Petta with Investor Relations for Granite Point. Chris, please go ahead.

Speaker 1

Thank you, And good morning, everyone. Thank you for joining our call to discuss Granite Point's Q1 2023 financial results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer Marcin Orbaczek, our Chief Financial Officer Steve Alpart, our Chief Investment Officer and Co Head of Originations Peter Morel, our Chief Development Officer and Co Head of Originations and Steve Plus, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of market conditions and review our current business activities. See that part will discuss our portfolio and Marcin will highlight key items from our financial results.

Speaker 1

The press release and financial tables associated with today's call were filed yesterday with the and are available in the Investor Relations section of our website along with our Form 10 Q. I would like to remind you that remarks made by management during this call and the supporting slides may include forward looking statements, which are uncertain and outside of the company's control. Forward looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. We We see our filings with the SEC for a discussion of some of our risks that could affect results. We do not undertake any obligations to update any forward looking statements.

Speaker 1

We will also refer to certain non GAAP measures on this call. This information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. A reconciliation of these non GAAP financial measures The most comparable GAAP measures can be found in our earnings release and slides, which are available on our website. I will now turn the call over to Jack.

Speaker 2

Thank you, Chris, and good morning, everyone. We would like to welcome you all to our Q1 2023 earnings call, and thank you for joining us today. Our business delivered strong operating results in the Q1 despite the challenging macro backdrop and negative sentiment around commercial real estate. Our well diversified, conservatively underwritten and granular floating rate senior loan portfolio continues to benefit from higher short term interest rates as our Q1 distributable earnings increased to $0.20 per basic share and covered our common stock dividend. Given the highly uncertain market environment, our balance sheet remains defensively positioned, benefiting from a well diversified funding mix, leverage that is meaningfully below our target range and a strong liquidity position.

Speaker 2

We continue to emphasize protecting our balance sheet and our stockholders' capital, while actively asset managing our portfolio and rationalizing our liabilities. The diversity of our funding and the strength of our lender relationships support the execution of our objectives. During the Q1, we successfully delevered our FL2 CLO and released substantial amount of capital further strengthening our liquidity position. The loans underlying the legacy CLO were refinanced on one of our large bank credit facilities, highlighting our good standing with lenders and our ability to refinance our assets even during periods of major market dislocations. Despite some signs of thawing and recently emerging signs of some more liquidity in the real estate capital markets, we continue to conservative approach to new loan originations.

Speaker 2

However, we have been opportunistic with respect to deploying capital into our own securities when they present attractive relative value. We bought back our common stock capitalizing on a deep value opportunity created by what we believe to be an unwarranted market discount versus our book value. We repurchased about 1,000,000 common shares, generating attractive returns and meaningful book value accretion for our shareholders, while maintaining our strong liquidity position. These repurchases have largely used up our prior stock buyback authorization as from time to time we have been an active market over the last couple of years, accretively repurchasing almost 4,000,000 of our common shares. As a result, and to provide us with more flexibility to actively manage our capital over time, our Board has increased our buyback authorization by an additional 5,000,000 common shares or almost 10% of our outstanding shares.

Speaker 2

As we have done in the past, we will remain opportunistic with respect to our repurchases taking into consideration multiple factors as we manage our business. Given our conservative stance on loan originations, we have been emphasizing proactive asset management and collaboratively working with our borrowers to ensure successful loan repayments and resolutions. In general, our borrowers continue to support their properties and protect their investments as they recognize the embedded value in those assets and wait for the markets to stabilize transaction volumes to begin returning to more normalized levels. In the near term, we believe that the recent developments in the regional banking sector are likely to further delay market recovery and impact liquidity for commercial real estate assets, given the reasonable bank's significant historical presence in this market. It remains unclear when the market environment stabilizes, the commercial real estate markets improved and for how long the Fed keeps short term interest rates elevated.

Speaker 2

Accordingly, we further increased our CECL reserves in the Q1 to about 3.8 percent of our total loan commitments. As the ongoing market disruptions, especially for certain properties located in some of the more challenging cities are likely to continue to create uncertainty. We remain focused on the macro trends in the office market and the individual performance of our office loans. We are keenly aware of the headwinds in the office market. But the office market is not monolithic and the performance depends on the specific market fundamentals and the particular assets.

Speaker 2

Properties located in our portfolio markets such as Miami continue having favorable demand characteristics and fundamentals. In other markets that were more impacted by the pandemic and where the trend of returning to the office is more delayed such as Minneapolis, there have been greater challenges. Fortunately, we have a very diversified and granular office portfolio across 19 MSAs. We have little to no office exposure in some of the most impacted markets such as San Francisco, Washington DC, Portland and Seattle. As for specific asset characteristics, approximately 90% of our office assets by UPB are either Class A or recently renovated.

Speaker 2

So while we are witnessing greater stress and challenges in some of our loans for which we have established reserves and where we are working with the borrowers on resolutions, These situations are not indicative of the balance of our portfolio. In addition, we take comfort in the strong sponsorship profile of the owners of the office properties securing our loans, the substantial cash equity invested in these properties to date and that these sponsors are generally committed to supporting their properties during this period of dislocation. Over the last year, our portfolio borrowers have contributed over $140,000,000 of additional equity in support of their properties. In the near term, we will maintain our conservative stance, actively managing our business, protecting our balance sheet and maintaining lower leverage, while emphasizing liquidity and collaboratively working with our borrowers. As we have said in the past, we believe that the U.

Speaker 2

S. Commercial real estate market provides attractive long term opportunities and the significant amount of capital, which is currently on the sidelines waiting for more market stability, will ultimately be deployed providing support for the sector. As the environment stabilizes and likely increased regulations for banks occur, Once we are on the other side of the current disruptions, this will allow us to take advantage as a non bank lender of attractive investment opportunities. I would now like to turn the call over to Steve Halperk to discuss our portfolio activities in more detail.

Speaker 3

Thank you, Jack, and thank you all for joining our call this morning. We ended the Q1 with an aggregate committed balance of $3,500,000,000 and an outstanding principal balance of about $3,300,000,000 with only $205,000,000 of future funding commitments, accounting for less than 6% of our total commitments. Our portfolio is well diversified across regions and property types and includes 88 investments with an average loan size of approximately 38,000,000 Our loans continue to deliver an attractive income stream with a favorable overall credit profile generating a realized portfolio yield of about 8% with a weighted average stabilized LTV at origination of 63%. Given our cautious stance on originations due to the market environment, During the Q1, we funded about $17,000,000 on existing commitments. Our repayments and loan pay downs totaled approximately $60,000,000 in the 1st quarter, which outpaced loan fundings and resulted in a slight decline in our portfolio balance over the quarter.

Speaker 3

As of March 31, our portfolio weighted average risk rating was 2.6, which was largely unchanged from the prior quarter of 2.5. During the Q1, we downgraded a $27,500,000 senior loan collateralized by an institutional quality full service hotel property located in downtown Minneapolis to a risk ranking of 5. The property was recently substantially renovated and It's owned by a well regarded institutional sponsor who invested significant cash equity to purchase and then renovate the property. Although the property's performance and the market in general have shown recent signs of improvement, operating performance has continued to be negatively affected by the ongoing impact of delayed business travel trends in the Minneapolis CBD and from the lingering impact of social unrest. We are actively working with the owner of the property who has elected to market the property for sale.

Speaker 3

We anticipate the property will be listed soon and are hopeful for a resolution this year, although the exact timing is hard to predict. As of March 31, we have 5 loans that are risk rated 5 and on non accrual status totaling $275,000,000 in UPB, for which we established specific CECL reserves of about $67,500,000 which implies an average estimated loss rate on those loans of about 25%. As we have mentioned in the past, we are in active discussions with all 5 of these borrowers and are evaluating a variety of potential resolution alternatives and will provide more information as these situations develop over the course of the year. 4 of our non accrual loans are backed by office properties, each with its own characteristics and attributes. As we evaluate a variety of resolution options for these office assets.

Speaker 3

Some may include a conversion to an alternative use. While not all office properties are amenable to such outcomes, we would like to point out that the Phoenix and San Diego office loans are 2 where the highest and best use could be other than an office building. The recently extensively renovated property securing the Phoenix office loan benefits from a convenient pedestrian oriented downtown location with nearby access to light rail and mass transit. The property's configuration lays out quite well for a conversion to residential use for which there is demand in the market. Similarly, the San Diego office property has an excellent location, is recently and extensively renovated and can be converted to hotel, residential or mixed use.

Speaker 3

The building's physical and locational attributes lend itself well to conversion. In fact, the borrower was under contract to a buyer who plan to convert the property to a hotel, but it fell out of contract shortly after the failure of Silicon Valley Bank. For both the Phoenix and San Diego assets, we are working with the borrowers to take possession of the properties and have had multiple indications of interest for purchase for conversion. We are evaluating a range of resolution alternatives, which could include a foreclosure or deed in lieu followed by a sale of the property. I will now turn the call over to Marcin for a more detailed review of our financial results.

Speaker 4

Thank you, Steve. Good morning, everyone, and thank you for joining us today. Yesterday afternoon, we reported our 1st quarter GAAP net loss of $37,500,000 or $0.72 per basic share, which includes a provision for credit losses of $46,400,000 or $0.89 per basic share. Compared to the prior period, our GAAP net loss widened due to an increase in our CECL reserves driven by the unsettled market conditions. Distributable earnings for the Q1 were $10,700,000 or 0 point distributable loss last quarter, which was mainly impacted by the resolution of 1 of our non accrual loans in Q4.

Speaker 4

On a pre loss basis, Quarter over quarter, our distributor earnings improved by about $0.03 per basic share, driven by higher net interest income as our floating rate portfolio continues to benefit from increases in short term interest rates. Our distributor earnings covered our common dividend in the Q1 Despite us carrying over $200,000,000 in cash, which represents over 20% of our equity, our balance sheet leverage meaningfully below our target levels and the 5 non accrual loans, which we estimate impacted our interest income by over $5,000,000 in Q1 or about $0.10 per share. Our first quarter book value declined by about $0.78 per common share or about 5% to $14.08 and was mainly affected by the increase in our CECL reserves, which was partially offset by an estimated $0.19 per share benefit from our share buybacks. As Jack mentioned earlier, During the Q1, we repurchased about 1,000,000 shares of our common stock given what we believe is a deep value opportunity our stock price currently represents. Our Board's increase in our buyback authorization of an additional 5,000,000 shares furthers our ability to over time be opportunistic in the market given our flexible and shareholder focused capital allocation strategy.

Speaker 4

Our CECL reserve at quarter end stood at about $33,000,000 or $2.54 per share, representing about 3.8 percent of our portfolio commitments. The $46,000,000 increase in our CECL reserve quarter over quarter was mainly related to a higher allowance on our collateral dependent loans and more recessionary macro assumptions used in our analysis reflecting the uncertain market environment. As disclosed in our earnings supplemental, slightly more than half of our CECL allowance or about $67,000,000 is allocated to the 5 non accrual loans. Turning to our capitalization and liquidity. As we announced in March, we successfully refinanced our legacy 2019 FL2 CLO and funded the $269,000,000 of loans with 1 of our bank facilities, which improved the efficiency of our loan level borrowings and released about $85,000,000 of capital further strengthening our liquidity position.

Speaker 4

This is our second refinancing of this type following a similar transaction in the Q2 of last year related to our legacy 2018 FL1 CLO and our term financing facility. We believe this highlights the strong general quality of our loan portfolio, Our ability to finance our assets during challenging market conditions and the strength of our long standing relationships with our lending partners as they look to do more business with us. In connection with this refinancing, we upsized our JP Morgan financing facility to $425,000,000 Additionally, post quarter end, we also extended the maturity of our Morgan Stanley facility to June 2024. As a result of the CLO refinancing, our total leverage ticked up at quarter end to 2.5 times from 2.3 times in Q4. We ended the quarter with over $220,000,000 in cash and continue to actively manage our liquidity, focusing on protecting the balance sheet and our investors capital given the market environment.

Speaker 4

Thank you again for joining us today. And now we would like to open the call for questions.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question today is coming from Steve Delaney from JMP Securities. Your line is now live.

Speaker 5

Good morning, everyone, and thanks for taking my question. Well, look, for starters, we really applaud the share buyback. I think it's a nice way to reward your shareholders during these difficult times, both what you've done and the increase that you planned. I'm wondering if you've also considered trying to buy back some of your convertible notes through reverse inquiry or other method. We have noticed in this earnings call A couple of commercial mortgage REITs have had some opportunities and bought back some debt.

Speaker 5

So any thoughts there, I'd appreciate. Thanks.

Speaker 4

Sure. Good morning, Steve. It's Marcin. Thank you for joining us.

Speaker 6

Hi, Marcin.

Speaker 4

Thanks for your questions. Appreciate the nice words on the buybacks. We thought it was a good use of capital So this is the price valuation. To your point on the converts, yes, it is something we've considered and we'll continue to consider. We've had some discussions around this internally.

Speaker 4

So it is on the table as a potential use of our liquidity, obviously, given the Upcoming, but true in the Q4. So, yes, it is something that's been debated internally.

Speaker 5

Okay, great. That's good to know. And I want to apologize, you The Dallas office loan that was new in the Q4. I don't think I ever really asked or dug into that, But a couple of things pop up. I mean, you were thank you for the details on the new Minneapolis hotel loan.

Speaker 5

But like I said, I kind of whiffed on this one. It's a smaller loan, obviously $32,000,000 compared to the Couple of your other office loans that are much larger. But here's what jumps out. It's a 2017 loan. So it's 6 years old, dollars 35,000,000 loan balance.

Speaker 5

The pricing is high at L+5.40 And the other thing I noticed, your $35,000,000 loan, it's almost 400 square feet, which is similar to Mini and San Diego, but those loans are $90,000,000 this one's $35,000,000 So just help me understand that picture as to what is unique here. And I'm just curious whether that's a Dallas is an older property or just in a not as attractive an area. Why the differences between Dallas and those other two office loans in your watch list? Thank you.

Speaker 3

Hey, Steve. It's Steve Alpart. Good morning. Thank you for your question.

Speaker 6

Sure.

Speaker 3

Yes. Look, I think you heard Jack say earlier in his prepared remarks that about 90% of our portfolio of office loans or Class A are recently renovated. So they're not all in that category. We've had other assets in the Dallas market. We think the market has some good trends in it.

Speaker 3

So obviously building by building, submarket by submarket. And this This is an asset that's underperformed and the leasing has been sluggish. So back to the point that it's not monolithic and everyone uses a different story. This has just been an underperformer for a number of years. And we talked about resolution strategies on a few of the assets.

Speaker 3

This one kind of falls in the same general category. You can extrapolate that. We're looking at all the typical options here. We're collaborative discussions with our borrower. All options are on the table and a sale of the property directly by the borrower or possibly a foreclosure or deed lieu followed by a sale or kind of like on the menu.

Speaker 3

And it's something that we're actively working on, but I can't say anything is imminent as of this call.

Speaker 5

Okay. That's helpful to understand the status. And is there I assume there's a specific reserve on this loan. Can you share with me what that amount would be?

Speaker 3

Yes. So we've so the 5 loans that are rated 5, have an aggregate asset Reserve of about $67,500,000 that's about 25%.

Speaker 1

Okay.

Speaker 3

They're all a little bit different, but they're you can kind of maybe estimate based on what the aggregate is.

Speaker 5

Got it. I understand. And also understand probably why it's not a great idea to put your specific reserve out there when negotiating with buyers, etcetera, etcetera. So thank you very much for the comments. Appreciate it.

Speaker 3

Thank you, Steve.

Operator

Thank you. Next question is coming from Stephen Laws from Raymond James. Your line is now live.

Speaker 7

Hi, good morning. Yes. One second what Steve said about the buybacks. I think that's a good sign to support your stock given concerns in the market, especially at these valuations where it's so accretive. First question, really more on the portfolio, it seems like in Total 45 rated loans, there were 9 of them and I know the hotel moved from 4 to 5.

Speaker 7

Were there many changes from 3 to 4 back and forth? Are we seeing the portfolio kind of separate These 9 loans that are 45 and you feel good about everything else. Can you maybe talk about that a little bit?

Speaker 3

Sure. It's Steve Alpart again. Hey, Steve. Good morning. So we talked about our Risk rating was relatively stable in the quarter, looking 2.5 to 2.6.

Speaker 3

There was not movement in the Fours and fives as a group except we did move that Minneapolis hotel loan from a 4 to a 5, but The total of those 4 or 5 loans is the same. And then as far as the rest of the portfolio, we did have Couple of other downgrades, they generally fall in the category of good performers that were not moved to a 4 obviously, but they move might say a 2 to a 3, where we think it was on track, everything's fine, but just given the market environment, we thought it was prudent to maybe move it one notch, but it was more along those lines. Nothing that we're at this moment concerned about.

Speaker 7

Great. As you have discussions with borrowers around extensions or modifications, how are those Any pushback or inability to buy new caps? Are there other protections you'd like to see in an Sure modification maybe instead of a cap at this point, can you talk about how those discussions are going with borrowers at the original maturity date?

Speaker 3

Yes. The tone of the conversations, we've talked about this in prior quarters, is still constructive. We have a good playbook where if a borrower is coming up on an extension or more recently maybe even a final maturity In exchange for pay downs, additional economics, spreads, fees, structure, We will work with those borrowers who are doing everything right. Some of those conversations that you can imagine involve getting a new cap. All things being equal, we like to have a new cap.

Speaker 3

The majority of our portfolio has either an active cap in place or other structure around the cap. So certainly in some cases if a borrower wants to put money into a reserve account, debt service reserve account, that's something that we consider. But we look at the cap or other structure as important. So we're almost always getting one of the other.

Speaker 7

Great. Appreciate the comments this morning. Thank you.

Operator

Thank you. Our next question is coming from Douglas Harter from Credit Suisse. Your line is now live.

Speaker 6

Thanks. Can you talk about how much of the or how much that you have against the current non accrual loans and or risk rated 5 loans?

Speaker 4

Sure. Good morning, Doug. Thanks for joining us. Thanks for your question. So I would say most of those loans in terms of UPB Are financed on the 2 sort of new facilities that we put in place in Q3 and Q4.

Speaker 4

So you see there's over $100,000,000 of leverage against 3 of those assets. I would say that that's the majority of the borrowings against those loans. There's a little bit more on the This is the majority of the leverage against

Speaker 1

them. Great.

Speaker 6

And appreciate The update on the properties that Steve gave, but just any more clarity on as far as timing as to when you might be getting Some of that capital back that you could either then use for the new buyback authorization or for new loans?

Speaker 3

Yes. So it's Steve again. So we are, As you can imagine, actively working on all five of these loans. They're all on a different path. Ideally, we'd like to resolve Some or all of these in the next couple of quarters.

Speaker 3

Just given the market, the timing is hard to predict, but high level, look, we certainly don't want to be a and we're not going to be a forced seller. We're trying to be thoughtful about it. But certainly the objective is over the next couple orders to start resolving as many of these as we can.

Speaker 1

Great. Thank you.

Operator

Thank you. Next question today is coming from Jade Rahmani from KBW. Your line is now live.

Speaker 8

Thank you very much. Beyond the risk 5 rated bucket of office, how is everything else going? You have a substantial amount of office loans, some of which are probably slated for maturity this year given the origination date. So wondering if you can give an update there.

Speaker 2

Hi, Jade. This is Jack. I'll give the more general update and Steve, if you want to say something more specific. Yes, the headwinds are Pretty intense in office nowadays. I would say that the majority of the conversation we're having with borrowers about it relates not to work from home dynamics and things like that, but which seems to dominate the press quite a lot.

Speaker 2

But really the absolute level of rates and it's the Fed has imposed on the market and the cost of carry as they move through this. So the which I believe is the main driver for stress in real estate, commercial real estate and in office. So for the rest of our portfolio, so we've gone through our risk rankings and our CECL reserves. There are some that we have our eyes on and are having more Significant conversations, but as we said, our portfolio is supported by borrowers that are Looking at the embedded value over time in their assets and are putting money in to support it, it's Difficult when rates are so high to navigate for some of them. But I'll point out another thing too, which what we've observed is in the more middle market with substantial institutional owners, but not so much the mega funds, if you will.

Speaker 2

They scramble a lot more to support their properties because it's more meaningful to them as opposed to some of the larger fund operators who view it as an opportunity maybe just to move on to the next fund that they've already raised and they will exercise their put option if you will for the lender. And so we're seeing that it's kind of a funny dynamic in that you might think that the bigger fund operators would be those that would stand behind their properties more. We're seeing it actually bifurcate a bit and the middle market loan. Our property said it's $50,000,000 with a $30,000,000 loan. They're really stepping up to the plate.

Speaker 2

I want to say though that this is not I'm not guaranteeing that we're not going to see any more credit migration downward. It's really path dependent, I believe largely on the Fed, and I think there's a lot of inner dynamics about the effect of rates, not just on the intentional destruction of value that they sought, but also the effect on much broader spots of the economy and things like major city centers and the stress that it's putting on municipalities. So Those paths are very uncertain still, and we're watching it very closely and in deep discussion with our borrowers on a daily or weekly basis.

Speaker 8

I mean, how on top of these loans are you in terms of asset management? What's your level of dialogue? I mean, right now there's 4 loans within the office portfolio. I don't know, I think it's beyond the Fed that's affecting office. I think that the Fed is affecting the other property sectors, multifamily, industrial, etcetera, Where we've seen cap rates widen, but not the level of distress playing out in office.

Speaker 8

Office, it's the complete inability to underwrite rent and the lack of demand. I think, yes, you are seeing some leasing activity and I think the best most renovated buildings are seeing demand, which is also somewhat surprising given your comments about the 2 conversions, those are freshly renovated projects. But what level of dialogue are you currently having with these borrowers? I mean, there's many loans that were originated years ago. Can you also talk about the magnitude, the dollar amount of office maturities you'll be facing in the next 3 quarters?

Speaker 2

So Jade, let me address. I thought I heard you, I'm sorry if I misheard you, I thought you were asking me about the nature of the conversations and what we're seeing with them. And so we are in repeat frequent asset management dialogue with our borrowers. And there's many that are doing quite well. There's some that are in between and there's the ones that we cited.

Speaker 2

And so I do agree with you that rates are affecting all of commercial real estate. For example, multi families that were originated bought or originated last year and put into CLOs are coming under Sticking with this, we're in intense touch with these borrowers on the office side. And I did not mean to say, if you took it this way, I did not mean to say that the Work from home dynamic and the reduction in demand was not a factor. I think it's a quite significant factor. I think in the near term though, the bigger factor is about liquidity, liquidity and liquidity.

Speaker 2

The demand affects that. But when you have an out of favor asset category, the liquidity first range from it. We'll see where it goes next, Right. But the I personally believe that there will be a healing in the capital markets and in the office market generally. Are out reflecting what our borrowers are reflecting back to us about where their main stresses are.

Speaker 8

And practically speaking in terms of let's just say across the office portfolio, are you in touch with all of the borrowers and what's frequency of dialogue?

Speaker 2

Well, Steve, maybe you can address that. The answer is yes. And it varies, Right, by the situation. And some of them, it's not a weekly discussion when there's not That much to be concerned about. In others, it's more frequent and intense.

Speaker 2

Steve, do you want to elaborate?

Speaker 3

Yes. So, I'd say the way The way we're set up, the originations team that, sources a loan, underwrites and closes a loan is responsible for that loan to payments. So there's a real kind of soup to nuts of approach here. So we're not really originating right now. So we have a So this is our focus point for our deal team.

Speaker 3

The amount of touch we're having is pretty significant. There's conversations about if there's a mod coming up, it will be a little bit more intense. We're looking at leases, we're reviewing leases, The site tours, there's business plans, reviewing business plans, budgets, there's still draws going on for CapEx, some leasing. So the amount of touch we're having, it's certainly not daily, although it can be daily at certain points, but it's we're very much in touch with all these borrowers. As you can imagine, a 4 or 5 greater loan might have more of a touch than a 1 or a 2.

Speaker 3

But I would say the level of dialogue both with us and our borrowers, us and our lenders is Kind of daily, weekly, ongoing and constructive.

Speaker 2

And Jade, I just want to point back a little bit. We had over 20% in repayments during the course of 2022, including running on a run rate running through to December and over half of that was in office. And while we fully expect that we're going to see a decrease in the amount of prepayments this year because of the market environment and all the shocks to the system by the continued raising of rates. Those office loans that we paid last year were financed or bought by As I said, including through the end of December. And we're seeing, I don't want to say anywhere near the robust pace as last But the significant pace of repayments in sight now, including for office loans.

Speaker 2

Now, that's evidence that are working with our borrowers and being in touch with them and accommodating or demanding depending on the situation their needs as we go on. And so it is something where we think that plan of working with them, extending out renegotiating for higher rates, etcetera, has proven fruitful for us.

Speaker 8

Thank you. And on the multifamily side, I know everyone's focus is on office. Generally, I would say summarizing Q1 earnings, multifamily has been pretty good, probably better than expected. However, there have been a few problem areas. One of your competitors which has a GSE servicing business, Freddie Mac delinquencies spiked quite notably within the portfolio.

Speaker 8

And just today, the Wall Street Journal is talking about performance in CLOs deteriorate. How are you seeing the multifamily performance?

Operator

Dave, do

Speaker 2

you want to talk about performance and then I'll make another comment?

Speaker 3

Sure. Yes. So notwithstanding the rise in rates and the economic environment, the Multifamily properties in our portfolio are generally exhibiting healthy fundamentals and we feel good about them. The portfolio is fairly diverse. It's mainly As and Bs.

Speaker 3

Our largest concentrations are in Southeast and Southwest. We're not just in the Southeast and Southwest. Those business plans typically involve renovation, CapEx plan, pushing rents, not so much growing rents as far as market rent growth, but more looking at the property next door and If we do this amount of renovation work, we can get the rents that got to getting next door. So we are still seeing as rent rolls turn monthly, quarterly, we are still seeing borrowers getting those underwritten rent bumps. Obviously, the housing market is expensive and rates are high, so that's helping the multifamily market.

Speaker 3

We're certainly seeing rents flowing. We did some but not a ton of business, I think, when the say late 2021 into early 2022. So we don't have a ton of that vintage. The vintage that we what we did do with that time period, we had dialed back leverage probably on average about 5 points and we had pushed up exit debt yields. So I fully There'll be some multifamily loans that are going to need another turn or 2 of the rent roll to get to the exit.

Speaker 3

But these are obviously 3 plus 1 plus 1 and in good market they might pay off in 2 or 3 years, maybe some need an extra year. And we have one right now by the way We did kind of near the peak of the market that they ended up putting in less CapEx, got Higher rent bumps and they're taking it down on an agency deal. I'm not saying everything's going to look like that, but I would say in general, We saw the headlines. In general, we feel good about the multifamily.

Speaker 8

That's great to hear. Thanks so much.

Speaker 2

Thank you, Jade.

Operator

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Jack any further or closing comments.

Speaker 2

I'd like to thank everybody for joining us for today. We really appreciate your time and attention. And I'd like to thank our team for all the hard work that you've been putting in to maintain our portfolio and the quality of it. And I especially want to thank our investors for the support you've shown to us.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

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Granite Point Mortgage Trust Q1 2023
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